Exemption and Relief from Maintenance of Average Export Obligation
Posted On April 30, 2022
Hey, my friend today we will spill the beans on the Exemption from maintenance of average export obligation (AEO) and Relief in average export obligation (AEO). To get a better picture of the exemption and relief from maintenance of AEO, we will have to understand how to calculate the average export obligation first.
So let’s begin right from the start, during the process of calculating the average export obligation (AEO), the exports that are being taken into consideration to fulfill the specific export obligation against Exports Promotion Capital Goods (EPCG) authorisations and that too within the valid export obligation period it can be the original period or even the extended one but make it a point to see to the fact that the one that has been made within the three preceding years will not be counted by the respected authorities.
The EPCG authorisation license holder must ensure that he/she is well versed in the process of fulfilling the export obligation. The license holder should have a proper record of the AEO to present before the respected authorities if at any point in time they ask for it. It’s better to be prepared than be a person with no plan in hand.
What is Exemption from maintenance of average export obligation (AEO) all about?
For instance, if the export of goods is related to the following products such as Handicrafts, Jute, Cottage and Tiny sector, Handloom, Agriculture, Animal Husbandry, Aquaculture (including fisheries), Pisciculture, Floriculture, Horticulture, Poultry, Viticulture, Sericulture, carpets, and coir then the EPCG authorization license holder is exempted from maintenance of AEO.
On the other hand, when we ponder over the export of goods like fishing trawlers, boats, ships, and other items of similar nature, then in that case this exemption from maintenance of AEO shall not be granted.
What is Relief in average export obligation?
Relief was introduced under the EPCG Scheme with the key goal to offer some sort of relief to the exporters of specific sectors. Now we are going to take a closer look at relief, it was designed for those sectors where the exports in a particular sector or group have declined by more than 5 percent as compared to the previous year.
It is stated that the AEO for that year might be reduced proportionately to the reduction in the exports of that specific sector or group during the relevant year when we put it up opposite the previous year. If the export has reduced in a case, consistently over the consecutive years then the base year for calculation of eligibility and calculation of the decrease in the average export obligation will be counted as the year post which the exports have displayed a continuous fall.
Now we will learn about the sectors or product groups where this kind of relaxation has been provided. The list of those sectors is given out by the Directorate General of Foreign Trade (DGFT) to all the regional authorities within seven months of the end of the previous financial year. The main duty of the regional authority is to refix the annual AEO for the past year and that too according to the exporters that are present in that sector or product group.
If you are an authorization holder then just make sure that you have all the documents related to the export obligation of goods and services ready in advance as that will save your time and energy in the process. And they say time is money, it’s true and it goes with all phases and walks of life.
Be certain that you are very clear with the procedure of calculating the average export obligation before getting indulged in any kind of process that has any type of relation to export obligation. You must have proof that shows that the export obligation has been fulfilled as it’s a crucial step of the whole procedure of AEO.
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